Question

Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 980 hours each month to produce 1,960 sets of covers. The standard costs associated with this level of production are:

	Total		Per Set of Covers
Direct materials	$	32,340	$	16.50
Direct labor	$	6,860		3.50
Variable manufacturing overhead (based on direct labor-hours)	$	1,960		1.00
			$	21.00

During August, the factory worked only 1,000 direct labor-hours and produced 2,100 sets of covers. The following actual costs were recorded during the month:

	Total		Per Set of Covers
Direct materials (6,000 yards)	$	34,020	$	16.20
Direct labor	$	7,770		3.70
Variable manufacturing overhead	$	3,990		1.90
			$	21.80

At standard, each set of covers should require 2.5 yards of material. All of the materials purchased during the month were used in production.

Required:

1. Compute the materials price and quantity variances for August.

2. Compute the labor rate and efficiency variances for August.

3. Compute the variable overhead rate and efficiency variances for August.

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

1 Material Price variance
material quantity variance
2. labor rate variance
Labor efficiency variance
3. Variable overhead rate variance
variable overhead efficiency variance

Answer 1

• All working forms part of the answer
• Actual data for 2100 set of cover and standard data for 2100 set of covers

Actual DATA for		2100	Set of covers
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	6000	$              5.670	$           34,020.00
Direct labor	1000	$                7.77	$             7,770.00
Variable Overhead	1000	$                3.99	$             3,990.00
Standard DATA for		2100	Set of covers
	Quantity (SQ)	Rate (SR)	Standard Cost
Direct Material	5250	$                6.60	$           34,650.00
Direct labor	1050	$                7.00	$             7,350.00
Variable Overhead	1050	$                2.00	$             2,100.00

• All Variances asked in the question

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                 6.60	-	$                 5.67	)	x	6000
	5580
	Variance		5580			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	5250	-	6000	)	x	$                           6.60
	-4950
	Variance		4950			Unfavourable-U
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$      34,650.00	-	$      34,020.00	)
	630
	Variance		630			Favourable-F
Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                 7.00	-	$                 7.77	)	x	1000
	-770
	Variance		770			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	1050	-	1000	)	x	$                           7.00
	350
	Variance		350			Favourable-F
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$         7,350.00	-	$         7,770.00	)
	-420
	Variance		420			Unfavourable-U
Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                 2.00	-	$                 3.99	)	x	1000
	-1990
	Variance		1990			Unfavourable-U
Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	1050	-	1000	)	x	$                           2.00
	100
	Variance		100			Favourable-F
Variable Overhead Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$         2,100.00	-	$         3,990.00	)
	-1890
	Variance		1890			Unfavourable-U